Friday, July 6, 2012

Financial Services stocks outperform the Nifty year to date - Economic Times

MUMBAI: Financial services stocks, as measured by the CNX Finance Index, have outperformed the broader market so far this year. The 15 stock CNX Finance Index, which reflects performance of companies from the banking, financial institutions and other financial services companies, gained 28% since January 2011 compared with the 15% rise in the Nifty.

Speculation that the central bank will re-look at the licence applications triggered a rally in these stocks in the trading sessions following the change in leadership of the finance Ministry.

Despite the sharp rise, Bajaj Finserv trades at a P/E (price to earnings) multiple of 7.55 times, a discount to the CNS Finance Index which trades at 12.68 times.

Based on its P/E, Bajaj Finserv is one of the cheapest stocks in the index after Punjab National Bank, which trades at a P/E multiple of 5.71 times and Rural Electric Corporation which trades at a P/E multiple of 6.74 times.

Whereas Rural Electric Corporation has risen 30.28%, Punjab National Bank has just risen 10.41% year to date and is one of the laggards in the index.

The other laggards are M&M Financial with returns of 10.23% and HDFC with returns of 3.6%.

Stocks (SXXP) and U.S. equity futures fell after a report showed American employers hired fewer workers than forecast last month. Treasuries rose for a second day while Spain’s 10-year debt yields reached 7 percent.

The Stoxx Europe 600 Index lost 0.6 percent at 8:35 a.m. in New York. Standard & Poor’s 500 Index futures slipped 0.7 percent. Spain’s 10-year yields climbed as much as 26 basis points to 7.04 percent, while the yield on German two-year notes slid below zero. The rate European banks say they see each other lending in euros for three months fell to an all-time low. Treasury 10-year yields fell three basis point to 1.57 percent. Oil retreated 2.2 percent and corn declined 2.5 percent.

Payrolls rose 80,000 last month after a 77,000 increase in May, less than a 100,000 gain forecast in a Bloomberg survey, Labor Department data showed. The European Central Bank yesterday reduced its benchmark rate to a record low of 0.75 percent and the People’s Bank of China cut borrowing costs for a second time in a month.

“There is weakness around the world,” Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, said in an interview on Bloomberg Television. “When you are at extremely low levels of policy interest rates, you can’t expect that that’s going to jump-start the economy.”

Three shares fell for every one that advanced in the Stoxx 600. Spain’s largest banks, Santander SA and Banco Bilbao Vizcaya Argentaria SA (BBVA), contributed the most to the equity benchmark’s decline, falling more than 2 percent. Industrial production fell for the ninth month in May, the National Statistics Institute in Madrid said.

Peugeot Deliveries

A gauge of carmakers posted the biggest slide of the 19 industry groups on the Stoxx 600 after PSA Peugeot Citroen reported that first-half deliveries dropped 13 percent from a year earlier and its share of the European market declined. The region’s second-biggest carmaker tumbled 6.2 percent.

The decline in U.S. futures indicated the S&P 500 will pare its second week of gains. The unemployment rate held at 8.2 percent. Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months.

The euro slipped 0.2 percent to $1.2365, leaving it 2.3 percent lower this week, the sharpest decline since the five- days ended Dec. 16. The rate on German two-year notes was at minus 0.008 percent.

Euribor Drops

The cost of insuring against default on European sovereign debt rose for a third day, with the Markit iTraxx SovX Western Europe Index of contracts on 15 governments climbing four basis points.

Oil in New York dropped to $85.28 a barrel, after falling 0.5 percent yesterday. Corn ended a 12 percent rally over three days that was due to dry weather crop damage in the U.S., the world’s biggest exporter of the grain. Wheat fell 2 percent.

July 2(Bloomberg) -- Marc Faber, publisher of the Gloom, Boom & Doom report, talks about his strategy for European stocks and the outlook for the EU debt crisis. Faber speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

July 5 (Bloomberg) -- Geoffrey Yu, a currency analyst at UBS AG, talks about the outlook for the euro and currency markets. He speaks with Sara Eisen on Bloomberg Television's "Lunch Money." (Source: Bloomberg)

July 6 (Bloomberg) -- Bruce Kasman, chief economist at JPMorgan Chase & Co., talks about the European sovereign-debt crisis and outlook for the U.S. economy and labor market. He speaks with Tom Keene and Scarlet Fu on Bloomberg Television's "Surveillance." (Source: Bloomberg)